September 2020 to June 2021 exams Watch free ACCA SBR lectures 115

Chapter 33
CURRENT ISSUES
The current issues within corporate reporting will be examined in either of Section A or B of the exam, and
will not be a full question like has been seen in the past. The likelihood is that it will form a part of a question.
To do well and ensure that you can pass the question you need to be able to think about the following:

1. Why do we develop new standards?

2. What is the development process?

3. Understand the current accounting standard and its application.

4. Understand the potential new rules/disclosure in the exposure draft/new IFRS and their application.

The ACCA CPD articles are highly useful to understand current issues in the world of corporate reporting
(http://www.accaglobal.com/uk/en/member/cpd-landing/cpd-online.html) as well as the technical articles
in the SBR section of the ACCA website (http://www.accaglobal.com/uk/en/student/exam-support-
resources/professional-exams-study-resources/strategic-business-reporting/technical-articles.html).

The world of current issues is forever evolving as new standards are developed, in order to keep up to date
with the current proposals of the IASB then their work plan set out the projects currently under
development (https://www.ifrs.org/projects/work-plan/).

1. Making Materiality Judgements (IFRS Practice Statement)

There is some concern that company accounts may have excessive disclosure, so that users can no longer
‘see the wood for the trees’. Therefore the Practice Statement gives guidance on how to determine what is
‘material’.
Learn the 4 steps that an entity should follow in assessing what is material for inclusion in the financial
statements.

1. Identify information that may be material for primary users – providers of finance.

2. Assess whether this information is actually material by size or nature.

3. Present the information clearly and concisely.

4. Stand back and look at the information as a whole to see what may need to be added or deleted.

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September 2020 to June 2021 exams Watch free ACCA SBR lectures 116

2. Disclosure of Accounting Policies (ED 2019/6)

Currently IAS 1 requires companies to disclose SIGNIFICANT accounting policies. This has, in some cases, led
to an excess of disclosure, causing investor confusion, and a lack of understandability.
Material policies would include those:

1. That have changed in the year

2. That are selected from a standard that gives a choice – e.g. Investment Properties can be measured
using the cost or valuation models.

3. Where there is no accounting standard.

3. Accounting Policy Changes (ED 2018/1)

IFRIC make Agenda Decisions. They tend to be on very technical matters and compliance is voluntary.
Examples on link below. Don’t worry – you don’t need to learn them!
https://cdn.ifrs.org/-/media/feature/supporting-implementation/agenda-decisions/agenda-decision-
compilations/agenda-decision-compilation-volume-1.pdf?la=en
The point is that, when agenda decisions are made, companies may choose to change accounting policy –
this can be very expensive because they would have to restate comparatives / do a prior year adjustment.
So, the ED proposes that there will be no need to restate comparatives / do a prior period adjustment if
COST OUTWEIGHS BENEFIT. Any changes would be adjusted PROSPECTIVELY.

4. Financial Instruments with the Characteristics of Equity (DP

2018/1)
This is a Discussion Paper (which precedes Exposure Drafts, so the project is at a very early stage).
You should learn the proposed definition of financial liability as follows:
๏ an unavoidable contractual obligation to transfer cash or another financial asset at a specified time
other than at liquidation; and/or
๏ an unavoidable contractual obligation for an amount independent of the entity’s available economic
resources – i.e does the entity have to deliver a fixed value of cash or another financial asset?
The impact of the change would be to classify certain items as liabilities rather than equity, thus increasing
gearing. These include:
๏ Loans which, on maturity, are convertible into a VARIABLE amount of equity shares – e.g. a loan which
would give the investor ten million dollars’ worth of the company shares, as opposed to 10 million
shares, irrespective of their value.
๏ Shares which the company is obliged to redeem at market price on the day of redemption.

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